Scoda Tubes Ltd.: Slight miss; structural thesis intact - Company Update

We retain BUY rating on Scoda Tubes but upward revise target price of Rs 250 (previously Rs 240). Increase in target price is mainly due to valuation rollover. Q3FY26 was a strong performance on offtake, marginally offset by pricing weakness and delay in start of new seamless capacity. Margins were a slight miss due to adverse product mix. We expect revenue to rebound in Q4FY26 due to full quarter of production at new capacity and strong order book. Robust demand from the power sector, expanding global approvals, low threat from new entrants and sustained supply tightness reinforce our conviction for re-rating, alongside improved cash conversion and a fierce 20%/ 39% EBITDA/ PAT CAGR over FY25-28E. With the recent share price correction, Scoda is trading at very attractive valuation of 9x FY28 PE. Re-iterate BUY.

Strong volume growth; offset by weak pricing:

Scoda reported Rs1.52bn of revenues; +17% yoy; +5% qoq; slight lower than our estimates of Rs1.65bn. Weak pricing and delay in start of commercial production at the new seamless SS pipes capacity was the main reason for the miss.

Unfavourable product mix affects margins:

Scoda reported margins at 15.1%; -270bps; -27bps qoq in Q3FY26, converting into an EBITDA of Rs230mn; flat yoy; +3% qoq. The decline in margin was mainly due to high contribution of pipes in the product mix. Sales of low margin hollow tubes also led to drag on margins. Further, the increase of depreciation (due to commissioning of new seamless capacity) and low other income (cash utilized in working capital) led to a PAT of Rs115mn; +18% yoy; -18% qoq.

What drives our conviction in the thesis?

The new seamless SS pipes is now fully operational and is expected to yield higher offtake in Q4FY26, in turn resulting in better margins. The fundamental conviction in Scoda is driven by strong underlying market demand and a deficit on supply. The Power sector is forecasted to be the primary demand driver for the 3-5years, supported by major thermal power capacity additions announced by NTPC and Adani Power. Scoda is well-positioned to scale up utilization from the newly secured approvals at entities like ADNOC, SABIC, Reliance, BARC. This will be further supported by large BHEL tenders that require Indian-made products and increasing presence in the US and Europe. We have cut our earnings estimates by 8%/ 6% resp. in FY26/ FY27E to account for the lower offtake in FY26. Remain positive.

Valuation, view & key risks:

We value Scoda tubes at a 19x Dec’27 PE (unchanged) to arrive at a TP of Rs250/sh (previously Rs240) and retain BUY rating. The increase in TP is due to valuation rollover offset by cut in earnings. Key Risks: Weakness in export demand, commodity price risk, delay in setting up of new welded plant.

Company website: https://www.scodatubes.com/

*CMP is as per report published date

Click to download the full Scoda Tubes Ltd Q3FY26 Company Update

Analyst:

• Sahil Sanghvi - Research Analyst, Institutional Equities (NISM-201900004744)
• Uvais Khatri - Research Associate, Institutional Equities (NISM-202300049054)

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FAQs on Scoda Tubes Ltd Q3FY26 Company Update

These FAQs highlight key takeaways from MNCL’s institutional equity research on Scoda Tubes, covering performance trends, growth drivers and risk factors relevant for long-term investors.

1. What is MNCL’s rating and target price for Scoda Tubes?

MNCL has maintained a BUY rating with a revised target price of ₹250, implying significant upside from the current market price.

2. Why did Q3FY26 performance miss expectations?

The miss was due to weak pricing, an unfavorable product mix and delays in the start of commercial production at the new seamless capacity, which impacted margins.

3. What will drive growth going forward?

Full-quarter contribution from the newly operational seamless capacity, strong order visibility and improved utilization are expected to support revenue and margin recovery from Q4FY26.

4. Which sectors are expected to drive demand?

The power sector is expected to be the key demand driver over the next 3–5 years, supported by large thermal capacity additions by NTPC and private players.

5. What are the key risks to monitor?

Weak export demand, volatility in commodity prices and delays in commissioning new facilities could impact earnings visibility.

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